HCL Tech Q2 preview: Street expects sequential rise in margins and profit

BFSI and Hi-tech segments are expected to perform better for HCL Tech, while manufacturing is likely to remain under pressure

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Information technology (IT) major HCL Technologies is expected to post a sequential rise in revenue and net profit, supported by deal ramp-ups and lower restructuring costs.

 

The IT firm will report its earnings for the quarter ended September on Monday, October 13. 

 

HCL Technologies' revenue is expected to rise by 3.81 per cent quarter-on-quarter (Q-o-Q) to ₹31,506.35 crore, according to consensus estimates compiled by Business Standard. Margins are expected to improve despite the growth guidance for generative AI and continued investments in SG&A and restructuring costs, analysts said. 

 

On the bottom line, the IT major is expected to post a 9.76 per cent sequential increase in net profit to ₹4,145.13 crore for the second quarter. However, on a year-on-year (Y-o-Y) basis, the net profit is expected to fall at an average of 0.19 per cent. 

 

Analysts noted that the BFSI and Hi-tech segments are expected to perform better, while manufacturing, particularly the auto segment, is likely to remain under pressure.

 

In the first quarter, HCLTech reported net profit for the first quarter of 2025-26 at ₹3,843 crore, down 9.72 per cent Y-o-Y. On a sequential basis, profit was down 10.7 per cent. It reported revenue of ₹30,349 crore, up 8.2 per cent over that in the same period a year earlier.

 

Key factors to watch include details on the large deal win, outlook on client discretionary spending amid rising macro volatility in the US, analysts said.  ALSO READ | TCS Q2 results: Net profit up 1.4% at ₹12,075 cr, revenue rises 2.4%

Here's how analysts of various brokerages expect HCL Technologies to fare in Q2:

Motilal Oswal:  The brokerage expects HCL Technologies to post 1.7 per cent Q-o-Q growth in constant currency, driven by revenue contribution from vendor consolidation deals starting from the second quarter. The brokerage projects full-year Y-o-Y constant currency (CC) growth of 3.6 per cent and organic growth of 2.8 per cent, in line with the company’s guidance of 3-5 per cent. 

 

Margins are expected to improve by 50 basis points, despite generative AI growth guidance of 3-5 per cent Y-o-Y in constant currency, along with continued investments in SG&A and restructuring costs.

 

Kotak Securities:  HCL Tech is likely to post 1.7 per cent sequential growth, driven by a ramp-up in mega deals within the engineering services segment. Growth is likely to be led by the services business, up 1.8 per cent Q-o-Q, while the products business is expected to see marginal growth of 0.8 per cent.

 

On a Y-o-Y basis, Ebit margin is expected to decline by 160 basis points due to a high base in the second quarter of FY25, when there was a large licence booking in the products segment. Kotak Securities also expects a healthy total contract value (TCV) of deal wins in the range of $2.5-3 billion.

 

Nomura:  The brokerage expects HCL Tech to report 1.2 per cent Q-o-Q revenue growth in constant currency during a seasonally weak quarter for its products business. The brokerage anticipates net new deal wins to exceed the usual $2-2.5 billion range, aided by the closure of one large deal.

 

Ebit margin is expected to rise modestly by 20 basis points Q-o-Q, despite ongoing restructuring and continued sales investments. Nomura expects HCL Tech to retain its full-year guidance of 3-5 per cent Y-o-Y revenue growth in constant currency and an Ebit margin band of 17-18 per cent for FY26.